1 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 1 7-AUG-06 11:12 THE ASBESTOS END-GAME JAMES L. STENGEL* INTRODUCTION Courts have long called on Congress to address the asbestos litigation crisis. In Amchem Products, Inc. v. Windsor, the Supreme Court observed that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. 1 Shortly thereafter, in Ortiz v. Fibreboard Corp., the court referred to the elephantine mass of asbestos cases... [which] defies customary judicial administration and calls for national legislation. 2 In a concurrence in that case, Chief Justice Rehnquist concluded that the asbestos crisis cries out for a legislative solution. 3 The Court most recently reaffirmed these observations in Norfolk & Western Railway Co. v. Ayers. 4 The United States Senate recently failed to support proposed asbestos legislation in the form of the Fairness Asbestos Injury Resolution Act of 2005 (Fair Act). 5 The Fair Act was intended to be a comprehensive legislative solution to the problems created by the current state of asbestos litigation. While the vote was a setback in the Fair Act s development, this was only the most recent incarnation of the legislation, and it is certain that Congress will continue to deliberate the merits of a federally mandated compensation regime. 6 What follows is a description of the evolving state of the * B.A. University of Illinois, J.D. University of Michigan. Partner, Orrick, Herrington & Sutcliffe LLP. The views expressed here are those of the author and not of any firm, entity or organization U.S. 591, (1997) U.S. 815, 821 (1999). 3. Id. at 865 (Rehnquist, C.J., concurring) U.S. 135, 166 (2003) (citing Ortiz, 527 U.S. at 821). See also REPORT OF THE JUDICIAL CONFERENCE AD HOC COMMITTEE ON ASBESTOS LITIGATION 3, (Mar. 1991) reprinted in MEALEY S LITIG. REP., Mar. 15, 1991, at sec. A [hereinafter AD HOC REPORT] (concluding that effective reform requires federal legislation creating a national asbestos dispute-resolution scheme); id., at (dissenting statement of Hogan, J.) (arguing that a national solution is the only answer and suggesting that Congress pass an administrative scheme similar to the black lung legislation). 5. Stephen Labaton, Asbestos Bill Is Sidelined by the Senate, N.Y. TIMES, Feb. 14, 2006, at C1. Supporters of the legislation, S. 852, 109th Cong. (2005), were unable to muster the number of votes necessary to override a budget objection. Id. 6. See id. For previous versions of the Fair Act, see infra notes and accompanying text. 223
2 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 2 7-AUG-06 11: NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 62:223 asbestos litigation regime and a consideration of the relative merits of various responses, including legislation, litigation and bankruptcy. As the recent Senate vote demonstrates, there is the unfortunate risk that a comprehensive federal legislative solution will not eventuate. It is therefore useful to focus the discussion on alternatives and illuminate the likely future for those unfortunate enough to be caught up in the asbestos litigation process. A survey of the sources of inefficiency, unfairness and distortion in the context of asbestos litigation and the range of potential litigation devices and solutions is also useful for participants in other mass torts. While asbestos litigation is unique in certain dimensions, it shares characteristics with other mass tort litigation and will likely, for better or worse, provide a template for mass tort litigation in the future. This article focuses first on the current state of asbestos litigation, paying particular attention to those aspects of the asbestos litigation process which, either because they generate false claims or misplace liability while creating expense and diverting resources from deserving claimants, must be addressed in order to achieve a satisfactory overall resolution. There is a substantial and growing scholarship on the asbestos litigation crisis, 7 but the more limited survey appearing in Part I provides an analytical framework for assessing the efficacy of various options. Having thus outlined the nature of the problem, this article then discusses potential solutions. First, Part II assesses the latest version of the Fair Act, with a particular focus on its success in meeting the identified needs and deficiencies of the existing asbestos litigation system. Part II also analyzes other legislative alternatives. These fall into two broad cat- 7. See, e.g., GRIFFIN B. BELL, ASBESTOS LITIGATION AND JUDICIAL LEADERSHIP: THE COURT S DUTY TO HELP SOLVE THE ASBESTOS LITIGATION CRISIS (2002) [hereinafter BELL, LITIGATION AND LEADERSHIP]; STEPHEN J. CARROLL ET AL., ASBESTOS LITI- GATION (2005) [hereinafter CARROLL ET AL., LITIGATION]; STEPHEN J. CARROLL ET AL., ASBESTOS LITIGATION COSTS AND COMPENSATION: AN INTERIM REPORT (2002) [hereinafter CARROLL ET AL., INTERIM REPORT]; Griffin B. Bell, Asbestos & the Sleeping Constitution, 31 PEPP. L. REV. 1 (2004); Lester Brickman, Ethical Issues in Asbestos Litigation, 33 HOFSTRA L. REV. 833 (2005) [hereinafter Brickman, Ethical Issues]; Lester Brickman, On the Theory Class s Theories of Asbestos Litigation: The Disconnect Between Scholarship and Reality, 31 PEPP. L. REV. 33 (2004) [hereinafter Brickman, Theory Class]; George L. Priest, The Cumulative Sources of the Asbestos Litigation Phenomenon, 31 PEPP. L. REV. 261 (2004); Victor E. Schwartz & Rochelle M. Tedesco, The Law of Unintended Consequences in Asbestos Litigation: How Efforts to Streamline the Litigation Have Fueled More Claims, 71 MISS. L.J. 531 (2001); Roger Parloff, The $200 Billion Miscarriage of Justice: Asbestos Lawyers Are Pitting Plaintiffs Who Aren t Sick Against Companies That Never Made the Stuff and Extracting Billions for Themselves, FORTUNE, Mar. 4, 2002, at 154.
3 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 3 7-AUG-06 11: ] THE ASBESTOS END-GAME 225 egories: (1) tort reform or medical criteria approaches at the federal level, and (2) state-by-state reform efforts, again targeted primarily, but not exclusively, at focused tort reform. Having examined the legislative solutions, Part III then addresses the procedural tools and structures available to resolve asbestos cases absent legislative relief. Here the focus is on litigation devices as well as potential settlement structures. In broad categories, the litigation can proceed on either a purportedly case-by-case basis, or via formal aggregation devices. Part IV examines the bankruptcy option in both the traditional contested Chapter 11 structure and the prepackaged bankruptcy as it has evolved in the asbestos context. Historically, asbestos litigation has clearly demonstrated the maxim that hard cases make bad law. 8 The perceived constraints on the deployment of these procedural options flow from the fact that, in the past, ill-advised litigation structures coupled with what, in some cases, can only be described as overreaching behavior by parties and/or counsel, have predictably led to judicial disfavor. This article attempts to provide an objective assessment of whether and to what extent these devices can be useful, and undertakes an objective comparison of each of these options. I. ASBESTOS LITIGATION: THE CURRENT LANDSCAPE In order to assess the efficacy and desirability of the various options available to address the problem of asbestos litigation, it is necessary to specify with more precision the constituent evils of the system. Beyond the substantial legal literature recounting the failures of asbestos litigation, 9 a variety of commentators have focused on the economic waste and inefficiency of the process. 10 These deficiencies are unique in that they are inflicted on both claimants 8. N. Sec. Co. v. United States, 193 U.S. 197, 400 (1904) (Holmes, J., dissenting). 9. See, e.g., Victor E. Schwartz et al., Addressing the Elephantine Mass of Asbestos Cases: Consolidation Versus Inactive Dockets (Pleural Registries) and Case Management Plans That Defer Claims Filed by the Non-Sick, 31 PEPP. L. REV. 271 (2004) [hereinafter Schwartz et al., Elephantine Mass]; BELL, LITIGATION AND LEADERSHIP, supra note 7; Brickman, Ethical Issues, supra note 7; Brickman, Theory Class, supra note 7; Richard O. Faulk, Dispelling the Myths of Asbestos Litigation: Solutions for Common Law Courts, 44 S. TEX L. REV. 945 (2003); Priest, supra note See generally JOSEPH. E. STIGLITZ ET AL., THE IMPACT OF ASBESTOS LIABILITIES ON WORKERS IN BANKRUPT FIRMS (2002); CARROLL ET AL., LITIGATION, supra note 7, at ; Solving the Asbestos Litigation Crisis: S. 1125, the Fairness in Asbestos Injury Resolution Act of 2003: Hearing Before the S. Comm. on the Judiciary, 108th Cong. (2003) (statement of Frederick C. Dunbar, Senior Vice President, National Eco-
4 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 4 7-AUG-06 11: NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 62:223 and defendants; the litigation has been, for some time, a disaster of major proportions to both the victims and the producers of asbestos products. 11 Moreover, absent some solution, litigation will continue into the foreseeable future: It is possible that millions of claims have yet to be made. 12 Conclusory statements lamenting the asbestos litigation crisis or describing the system as broken support the need to find a solution but have limited utility in designing a specific solution or assessing its likely efficacy. It has taken decades of complex interaction of action and response among a large cast of actors for asbestos litigation to evolve into its current state. Historical context is important in asbestos litigation, as there are circumstances which may be inexplicable to an observer that become logical, if not desirable, with the perspective of history. A. American Use of Materials Containing Asbestos A substantial contributor to the asbestos litigation problem is the utility and ubiquity of asbestos itself. Although known and used in ancient societies for its fire- and chemical-resistant aspects, 13 the fibrous mineral first saw common use as insulation in the United States in the 1860s. 14 From there the growth in the use of asbestos continued, at times slowly and at other times explosively. Asbestos was used in buildings, foundries, homes, automobiles, and a wide variety of commercial products. 15 It is also a naturally occurring nomic Research Associates), available at print_testimony.cfm?id=777&wit_id= AD HOC REPORT, supra note 4, at 2. See also Georgine v. Amchem Prods., Inc., 157 F.R.D. 246, 265 (E.D. Pa. 1994) (stating that the Judicial Conference Report, which dates from the early 1990s and is predicated on an assessment of conduct up to the 1980s, was a ringing condemnation of the asbestos litigation process in the tort system ), vacated, 83 F.3d 610 (3d Cir. 1996); BELL, LITIGATION AND LEADERSHIP, supra note 7; Brickman, Theory Class, supra note 7. Some commentators believe that the crisis label understates the magnitude of the problem. As George Priest concludes: [T]he asbestos litigation phenomenon has resulted, in contrast, from a cumulative set of intentionally adopted changes in law and procedure that together have created litigation that is and will continue to be unending and infinite in magnitude. Priest, supra note 7, at INTERIM REPORT, supra note 7, at See In re Joint E. and S. Dist. Asbestos Litig., 129 B.R. 710, 735 (E. & S.D.N.Y. 1991) (discussing a lung disorder known to Pliny the Elder and Strabo, a Greek geographer (citing B. CASTLEMAN, ASBESTOS: MEDICAL AND LEGAL ASPECTS 1 (1986))). 14. Id. 15. See JAMES S. KAKALIK ET AL., COSTS OF ASBESTOS LITIGATION 3 (1983).
5 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 5 7-AUG-06 11: ] THE ASBESTOS END-GAME 227 mineral, so everyone has some exposure. 16 Substantial increases in use accompanied increased wartime production, although domestic use did not peak until Although there had been a long-standing understanding of the occupational risks of those who manufactured asbestos-containing products, 18 and there were occupational standards governing permissible workplace exposure, 19 it was through the epidemiological work conducted by Dr. Irving Selikoff and others at Mt. Sinai Hospital in the 1960s and 1970s that the risks for insulators and other heavily exposed workers were publicly identified. 20 Partly in response, the federal government established the Occupational Safety and Health Administration (OSHA) in 1970, which issued its initial restrictions on the workplace use of asbestos in Subsequently, these regulations were modified to further reduce the allowed level of occupational asbestos exposure. 22 As Judge Weinstein has observed: Because of the increased awareness of dangers and new government regulations, use of new asbestos essentially ceased in the United States in the early 1970 s. 23 B. Asbestos-Related Injuries 1. Cancer Many varieties of cancer are associated with asbestos exposure. These include mesothelioma, or malignancy of the thin membrane that lines the chest (pleural mesothelioma) or the peritoneum (peritoneal mesothelioma). Pleural mesothelioma among males is 16. Andrew Churg, Nonneoplastic Diseases Caused by Asbestos, in PATHOLOGY OF OCCUPATIONAL LUNG DISEASE 213, 219, (Andrew Churg & Francis H.Y. Green eds., 1988). 17. CARROLL ET AL., LITIGATION, supra note 7, at In re Joint E. and S. Dist. Asbestos Litig., 237 F. Supp 2d 297, 301 (E.D.N.Y. 2002) ( The major dangers of asbestos were known in this court as early as the 1930s. (citation omitted)). 19. See In re Joint E. and S. Dist. Asbestos Litig., 129 B.R. 710, (E. & S.D.N.Y. 1991) (discussing early recommendations that child labor not be used in asbestos-related manufacturing, as well as the U.S. Navy s wartime regulations for asbestos-related jobs). 20. See, e.g., I. J. Selikoff et al., The Occurrence of Asbestosis Among Insulation Workers in the United States, 132 ANNALS OF THE N.Y. ACAD. OF SCI. 139 (1965). 21. Occupational Safety and Health Standards, 36 Fed. Reg. 10,466 (May 29, 1971) (now codified at 29 C.F.R (2005)). 22. See Emergency Standard for Exposure to Asbestos Dust, 36 Fed. Reg. 23,207 (Dec. 7, 1971); Standard for Exposure to Asbestos Dust, 37 Fed. Reg. 11,318 (June 7, 1972) (now codified at 29 C.F.R (2005)). 23. In re Joint E. and S. Dist. Asbestos Litig., 129 B.R. at 737. Of course, there is to date no bar on the use of asbestos.
6 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 6 7-AUG-06 11: NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 62:223 viewed as a signature asbestos disease. 24 However, there is some dispute as to other causes, and about half of the reported cases of mesothelioma have no documented exposure to asbestos. 25 Lung cancer, particularly among smokers, has also been attributed to asbestos exposure, although there is substantial question whether asbestos can be considered a cause of lung cancer absent medically documented asbestosis. 26 Other cancers of the throat, gut and digestive system have also been attributed to asbestos exposure and have supported recovery in the tort system, but the causal role of asbestos as to these diseases is hotly contested. 27 All of these cancers have other causes, and in many cases when there is no doubt that the claimant is sick, there will be substantial debate as to whether the disease was caused by asbestos exposure. Assessing causation is made much more difficult by the long latency that is characteristic of asbestos-related cancers. Latency periods of twenty, thirty, and forty or more years are common, making proof of contemporaneous exposure an exercise in speculation rather than certainty. 2. Asbestosis The second broad disease category is asbestosis, which is a condition involving scarring of the internal structures of the lung. Historically, claimants with heavy occupational exposure to friable (breathable) asbestos have been disabled or died due to asbestosis. As time has passed, these cases have become quite rare, reflecting the diminished occupational exposure. Nonetheless, the medical and legal status of the remaining claims is disputed. 24. See Troyen A. Brennan, Environmental Torts, 46 VAND. L. REV. 1, 15 (1993) (stating that mesothelioma is a signature disease of asbestos ). 25. Victor L. Roggli et al., Mesothelioma, in PATHOLOGY OF ASBESTOS-ASSOCI- ATED DISEASES 109, 112 (Victor L. Roggli et al., eds., 1992). 26. See, e.g., Georgine v. Amchem Prods., 157 F.R.D. 246, 274 (E.D. Pa. 1994) ( All seven medical experts who testified on this point recognized that there was a difference of opinion in the medical community as to whether underlying asbestosis is required before a lung cancer may be attributed to asbestos exposure or whether it is sufficient that there be exposure sufficient to cause asbestosis, whether or not the claimant has actually contracted asbestosis. ). 27. See, e.g., ARLEN SPECTER, THE FAIRNESS IN ASBESTOS INJURY RESOLUTION ACT OF 2005: REPORT TOGETHER WITH ADDITIONAL AND MINORITY VIEWS, S. REP. NO , at 115 (2005) [hereinafter SPECTER, REPORT] (containing the report of Dr. James D. Crapo, Chairman of the Department of Medicine for the National Jewish Medical and Research Center, that current medical science does not establish a causal relationship between asbestos exposure and... cancers other than lung cancer and mesothelioma).
7 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 7 7-AUG-06 11: ] THE ASBESTOS END-GAME 229 The asbestos litigation system has compensated claims that fall far short of the serious and indisputable asbestosis cases. Asbestosis is typically diagnosed via X-rays, the utilization of breathing tests called pulmonary function tests (PFTs), and by a physician making a medically appropriate diagnosis after taking a detailed occupational and personal history. All of this is necessitated by the fact that at lower diagnostic levels, there are more than one hundred other causes of the lung changes which may be viewed as evidence of asbestosis. 28 Problematically, X-rays are interpreted according to a somewhat subjective evaluation wherein a certified medical professional (usually a radiologist), termed a B-Reader, reviews a patient s X- ray and assigns a rating from a twelve-point scale developed by the International Labour Office (ILO). The ILO scale runs from 0, which means normal, to 3, which is the most extreme. Two numbers are provided the first constituting the reviewer s baseline assessment and the second the next most likely amount of scarring. Hence, a 0/0 is completely normal, while a 0/1 indicates a normal finding coupled with an acknowledgment that another reader might find something there. This subjectivity has created much of the fight over the compensability of low-level asbestos cases. 29 A second methodology relating to asbestosis assessment is the PFT test, which assesses breathing capacity. Here a medical practitioner performs a number of tests involving measured exhalation. Test results are expressed in terms of deviation from a normal standard. Again, however, this test presents problems for lower level asbestos cases; the PFT test can be misleading due to variations in patient effort, calibration of equipment and the conduct of the tests. The taking of a detailed patient history along with these diagnostic tests is of critical importance, because the test results do not themselves demonstrate asbestos causation Pleural Plaque The third condition that has supported compensation, although not consistently across time or jurisdictions, is a scarring of 28. Raymark Indus., Inc. v. Stemple, No K, 1990 WL 72588, at *8 (D. Kan. May 30, 1990) ( there are as many as 150 causes of fibrosis ). 29. Brickman, Theory Class, supra note 7, at The fact that pleural plaques are not compensable in many jurisdictions demonstrates the limited usefulness of the diagnostic tests. See, e.g., In re Hawaii Fed. Asbestos Cases, 734 F. Supp. 1563, 1567 (D. Haw. 1990); Wright v. Eagle- Picher Indus., 565 A.2d 377, (Md. Ct. Spec. App. 1989); Giovanetti v. Johns-Manville Corp., 539 A.2d 871, 875 (Pa. Super. Ct. 1988).
8 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 8 7-AUG-06 11: NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 62:223 the pleura. 31 There are extremely rare cases where this scarring leads to reduced lung function, but in almost all pleural or pleural plaque cases there is no impairment. This condition is revealed only through radiographic examination. While pleural plaques are considered evidence of asbestos exposure, they have other causes. There are disputes about what radiographic evidence is necessary to establish their existence. There is also debate about whether pleural plaques have any predictive value for subsequent asbestos-related disease. 32 C. History of Asbestos Litigation The current litigation system did not spring fully-formed into its current state, but is rather the evolutionary endpoint of a system that has absorbed a number of legal and social changes and has adapted to a variety of often well-intentioned efforts to impose fairness and rationality. Where we are today reflects the collision between best intentions, a serious occupational health crisis, systemic inadequacies, perverse economic incentives, and immense wealth. Recitals of the history of asbestos litigation typically begin with the Fifth Circuit s decision in Borel v. Fibreboard Paper Products Corp., which established strict liability against asbestos manufacturers. 33 Before that point, plaintiffs had enjoyed relatively little success, but the next years saw a virtual explosion of asbestos cases. 34 By the early 1980s, some twenty thousand claimants had filed cases and $1 billion had been spent on asbestos litigation. 35 That explosion, miniscule as it may appear in hindsight, eventually triggered a seismic event that presaged many of the developments of the next twenty-plus years of asbestos litigation the Manville bankruptcy. 36 Manville s filing was not a result of actual insolvency, but of projections that indicated the company would soon find itself insolvent. The Manville filing was the consequence of conduct occurring decades earlier. The real history of the litigation goes back to the conduct of a small group of companies from the 1920s to the 31. Brickman, Theory Class, supra note 7, at See SPECTER, REPORT, supra note 27, at 114 (citing the statement of Dr. Crapo that the presence of pleural plaques... due to asbestos exposure does not increase the risk of developing either asbestosis or lung cancer ) F.2d 1076, 1092 (5th Cir. 1973). 34. CARROLL ET AL., LITIGATION, supra note 7, at JAMES S. KAKALIK ET AL., VARIATION IN ASBESTOS LITIGATION COMPENSATION AND EXPENSES v (1984). 36. See In re Johns-Manville Corp., 68 B.R. 618 (Bankr. S.D.N.Y. 1987), aff d sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988).
9 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 9 7-AUG-06 11: ] THE ASBESTOS END-GAME s. 37 With respect to Manville and the other defendants, plaintiffs were able to document efforts to suppress scientific information and control the contents of publications during time periods where the hazards of asbestos were not generally well known. Further, the nature of the products, typically asbestos-containing thermal insulation, meant that there was extremely heavy occupational asbestos exposure among the relevant workers. Manville was also far and away the dominant manufacturer of asbestos-containing products. 38 As a result of this kind of conduct and the serious injuries it caused, asbestos litigation commenced as a contest between sick people and culpable entities. Causation might have been contested, especially as the science of asbestos-related disease developed, but these claimants were typically ill because of demonstrable and sustained exposure to the products of the entities they were suing. If Borel in 1973 is viewed as a well-meaning trigger for asbestos litigation, it is remarkable how quickly, in retrospect, courts and commentators identified a developing crisis. By the mid-1980s, filing rates climbed precipitously. 39 Courts at that time made reference to an avalanche of litigation. 40 Conditions extant in the late 1980s led to the creation of the Judicial Conference Ad Hoc Committee on Asbestos Litigation. The Committee s 1991 report concluded that the situation has reached critical dimensions and is getting worse; 41 that the litigation was a disaster of major proportions to both the victims and the producers of asbestos products; 42 and that courts are ill-equipped 43 to handle the masses of claims fairly or efficiently. Contemporary commentators took a similarly dim view of the situation PAUL BRODEUR, OUTRAGEOUS MISCONDUCT (1985). 38. Lester Brickman, The Asbestos Claims Management Act of 1991: A Proposal to the United States Congress, 13 CARDOZO L. REV. 1891, 1894 n.13 (1992) ( Before bankruptcy, Manville bore the brunt of asbestos litigation, it had the largest market share of asbestos-product sales and was assessed the highest amount of liability by the tort system. ). 39. Georgine v. Amchem Prods., 157 F.R.D. 246, 263 (E.D. Pa. 1994) ( Although by this time state and federal courts were already burdened by many asbestos claims, amazingly 1986 saw the rate of filing of new asbestos suits quadruple. ). See also CARROLL ET AL., LITIGATION, supra note 7, at Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 470 (5th Cir. 1986) (citation omitted). 41. AD HOC REPORT, supra note 4, at Id. 43. Id. 44. See, e.g., Lester Brickman, The Asbestos Litigation Crisis: Is there a Need for an Administrative Alternative?, 13 CARDOZO L. REV. 1819, (1992) [hereinafter
10 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 10 7-AUG-06 11: NYU ANNUAL SURVEY OF AMERICAN LAW [Vol. 62:223 At almost the same time, the Manville Personal Injury Settlement Trust, the vehicle intended to address Manville s huge liability, was shut down by Judge Weinstein after eighteen months of operation when it became clear that the trust was at risk of dispensing most of its assets to the first-arriving claimants. 45 The ensuing decade saw failed efforts at a comprehensive legislative solution; 46 the subsequent failure of narrower attempts embodied in Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp.; 47 the revival, albeit at dramatically reduced payout rates, of the Manville Trust; 48 the repeated failure of the Manville Trust; 49 the failure of the Fibreboard settlement; 50 and the rise of medical screening. 51 After a brief period of declining annual claims, claiming rates then rose dramatically. 52 Throughout this period, necessity, occasioned by the ever-increasing number of cases, resulted in a number of experiments with aggregation. 53 However well-intentioned, these experiments failed, not only as mechanisms to clear dockets and to adjudicate the claims then pending, but also by facilitating the increasing rate of claim filings: [M]ass consolidations only serve to magnify the irrationality of a litigation system that awards massive amounts to the Brickman, Crisis] (arguing that [t]rend reversal [to] substantially eliminate the claims of the unimpaired... is not likely attainable under the aegis of the current tort system ); Note, In re Joint Eastern and Southern District Asbestos Litigation: Bankrupt and Backlogged A Proposal For the Use of Federal Common Law in Mass Tort Class Actions, 58 BROOK. L. REV. 553, 554 (1992) (recounting the recent history and manifold inequities of asbestos litigation). 45. Findley v. Falise (In re Joint E. & S. Dists. Asbestos Litig.), 878 F. Supp. 473, (E. & S.D.N.Y. 1995). 46. See infra Part II.A. 47. See infra Part III.B. 48. See infra Part IV.A.2.b. 49. See infra Part IV.A.2.c. 50. See Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (reversing the certification of a settlement class). 51. See infra Part I.D CARROLL ET AL., LITIGATION, supra note 7, at 71. Though total claims had declined by over 30% from 1996 to 1997, by 2001, the filing rate was almost twice the 1996 number. Id. 53. See, e.g., Jenkins v. Raymark Indus., Inc., 109 F.R.D. 269 (E.D. Tex. 1985), aff d, 782 F.2d 468 (5th Cir. 1986); Cimino v. Raymark Indus., Inc., 751 F. Supp. 649 (E.D. Tex. 1990), rev d, 151 F.3d 297 (5th Cir. 1998) (experimenting with consolidation and class actions); Malcolm v. Nat l Gypsum Co., 995 F.2d 346, 352 (2d Cir. 1993) (reversing an experiment with consolidation).
11 \\server05\productn\n\nys\62-2\nys204.txt unknown Seq: 11 7-AUG-06 11: ] THE ASBESTOS END-GAME 233 unimpaired while threatening the ability of seriously ill people to obtain compensation in the future. 54 As one commentator noted: Judges who move large numbers of highly elastic mass torts through their litigation process at low transaction costs create the opportunity for new filings. They increase the demand for new cases by their high resolution rates and low transaction costs. If you build a superhighway, there will be a traffic jam. 55 D. The Elasticity Problems of Contemporary Asbestos Litigation There are two fundamental phenomena that interact to create today s asbestos litigation crisis. The first is claimant elasticity, 56 which refers to the essentially inexhaustible supply of claimants. The second is the correspondingly unbounded source of defendants, here separately labeled as defendant elasticity. Both elasticities stem from the same root cause: the inability of the asbestos litigation system to discriminate both between those with real asbestos-related injuries and those without, and between defendants who are in fact culpable and those more appropriately viewed as solvent bystanders. 57 Elasticity, termed price elasticity of demand, is an economic concept: if a price increase causes reduced demand, or vice versa, demand is said to be elastic. 58 In the context of asbestos litigation, the phrase has been used in a general sense to indicate that if com- 54. Fairness in Asbestos Compensation Act of 1999, H.R. 1283, 106th Cong. 2 (1999). 55. Francis E. McGovern, The Defensive Use of Federal Class Actions in Mass Torts, 39 ARIZ. L. REV. 595, 606 (1997) [hereinafter McGovern, Class Actions]; see also Brickman, Crisis, supra note 44, at 1826 ( The more successful courts become in devising ways to more quickly and assuredly compensate the meritorious, the larger the number of unmeritorious claims that were able to enter the system. ); Francis E. McGovern, An Analysis of Mass Torts for Judges, 73 TEX. L. REV. 1821, (1995) [hereinafter McGovern, Analysis for Judges] (examining the experience of Maryland, which experienced a significant increase in claims after implementing innovations to streamline asbestos trials). 56. Elasticity, along with maturity, is one of McGovern s contributions to the analytic lexicon of mass torts. See Francis E. McGovern, The Tragedy of the Asbestos Commons, 88 VA. L. REV (2002) [hereinafter McGovern, Tragedy Commons]; Francis E. McGovern, Rethinking Cooperation Among Judges in Mass Tort Litigation, 44 UCLA L. REV (1997); Francis E. McGovern, Resolving Mature Mass Tort Litigation, 69 B.U. L. REV. 659 (1989); McGovern, Analysis for Judges, supra note 55; Francis E. McGovern, Toward a Functional Approach for Managing Complex Litigation, 53 U. CHI. L. REV. 440 (1986). 57. Schwartz et al., Elephantine Mass, supra note 9, at 280 (quoting plaintiffs attorney Richard Scruggs (citation omitted)). 58. See KARL E. CASE & RAY C. FAIR, PRINCIPLES OF ECONOMICS, (5th ed. 1999).